Inside Asian Gaming

The Asian Gaming 50 – 2013 As the last of Macau’s six licensees to receive land on Cotai, SJM was ready to hit the ground running there with an approach to development that is as innovative as it is expansive. Much of this comes down to the corporate leadership of Ambrose So, who is showing himself to be an ambitious and creative strategist. A protégé of Stanley Ho’s, respected throughouttheindustryasasolidoperational 6 Ambrose So Executive Director and CEO SJMHoldings company said, and investors were happy to hear that the opening of the 500,000-square-meter, 1,700-room resort has been ratcheted up a year to the first half of 2016. Concerns about cost also were allayed with the assignment of a more or less final price tag of US$4 billion. He colored in some additional detail as well. Wynn Palace will be reminiscent of Bellagio, he said, with a lake at the entrance bordered by restaurants and enlivened with fire and lights, which will sound to some a bit like Wynn Macau, but this will be on a more elaborate scale: the highlight is a sort of amusement ride: an aerial tramwith gondolas in the shape of dragons that breathe smoke as they ferry visitors over the lake from the light rail station adjoining the property. The overall theme he described as “flowers, floral things”—also reminiscent of Bellagio—but this will be quite distinct and will feature terraced gardens, floats, sculptures of various shapes and sizes, some as large as 12 meters across. “Our resorts have always had a special public entertainment piece,” he said, and at this one “The use of flowers, of water and natural light … has been taken to a new level.” Steve Wynn, being the legend he is when it comes to design and execution, his shareholders like it when he gets ambitious, and both Wynn and its Hong Kong-listed Wynn Macau subsidiary have been trading at close to their 52-week highs—tasty Q2 dividends attached (US$1 and HK$0.50, respectively). As much as anything, though, the multiples Wynn commands are an expression of confidence in a strategy that refuses to cut corners with the luxury niche it’s established for itself, which enables the properties to succeed consistently at portraying themselves as “boutique” alternatives in spite of their obvious girth. Wynn will play poker on the Las Vegas Strip with 300 or 400 bps of occupancy in exchange for room rates that run at more than double Strip averages. There are a lot of moving parts involved in making that work, and it takes operational savvy to pull it off, and Mr Wynn, on old hand at competing in the toughest markets there are, is as savvy as they come. He’s added more prudent financial management to his arsenal, too, since relinquishing Mirage Resorts to Kirk Kerkorian all those years ago, and his skill at identifying and nurturing talented management is more in evidence than ever. This is serving him particularly well right now at the two Macau hotels, where gaming volumes have been slipping as competition on the peninsula intensifies in response to the growth on Cotai. But both hand, in publicly traded SJM Holdings he has a company with HK$25 billion in cash and cash equivalents, minimal long-term debt and plans to take the brand beyond Macau. Reports are the company has toured Taiwan’s Penghu and Kinmen islands for possible development sites and is researching joint ventures in Japan, preferably Osaka, which Mr So says offers more developable space than Tokyo for doing something on a destination-resort scale. On Cotai he’s gained a “leg up on competition,” as he puts it, by tripling the size of SJM’s footprint, currently the smallest at roughly 70,000 square meters, via a deal concluded earlier this month with the are consistently Michelin- and Forbes Five Star-rated and neither is going to be budged from its position at the top of the market. “Even when we came to Macau, we resisted the temptation to build a quickie, smaller place, to get in on it fast,” the boss has said. “We waited and we took our time. I think that that is exactly the way to go forward in China—very thoughtfully, very patiently, with great attention to detail.” Those were the attributes that preceded Wynn Resorts to Macau in 2002, when such was Mr Wynn’s renown, his was the only non- Chinese company to be awarded one of the three new casino concessions. And they aptly describe what he has accomplished in the market to date with operating assets the company values currently at around $5 billion and which delivered better than 94% occupancy in the first half at daily room rates averaging well above $300. Non-gaming revenues surpassed $118 million over the period. In all, Wynn Macau generated 70% of corporate EBITDA through the first half and 77% of operating income. As for Wynn Palace, it “represents everything we’ve learned,” Mr Wynn has said. It will be “the single most important project in the company’s history”. It’s a good location for it, too. It will be the first stop on the city’s new light rail network from Macau International Airport and the new Taipa ferry terminal under construction and the closest resort to both. redoubtable Angela Leong, an SJMexecutive director and the mother of five of Stanley Ho’s children, to join up with 180,000 square meters she controls immediately south of it. The blueprint for the HK$25 billion resort (US$3.2 billion) includes 700 table games and 1,000 machine games, a complement of “first-class” dining, entertainment and retail, and 2,000 hotel rooms, more than 200 of whichwill beapportioned toaGianniVersace hotel under the terms of an agreement also announced earlier this month. It will be only the third hotel in the world to bear the name of the legendary fashion house and it will be a key differentiator for the resort among China’s brand-obsessed millions. 16 INSIDE ASIAN GAMING | September 2013